Tanzania to pass laws next week to renegotiate minerals contracts

The three draft laws, introduced on Thursday and pored over by parliamentarians in closed-door sessions on Friday, will be used against the multi-billion dollar mining sector first, analysts said.Reuters | July 01, 2017, 15:19 IST

DAR ES SALAAM/NAIROBI: Tanzania's parliament should pass legislation next week that would allow it to force mining and energy companies to renegotiate their contracts, the justice minister said on Friday.

The three draft laws, introduced on Thursday and pored over by parliamentarians in closed-door sessions on Friday, will be used against the multi-billion dollar mining sector first, analysts said.

They follow 18 months of wrangling between mining companies and President John Magufuli that have delighted Tanzanian voters but alarmed foreign investors.

Magufuli took office in 2015 vowing to stamp out corruption. He has fired ministers, the heads of the port and the revenue authorities, and 10,000 civil servants.

He repeatedly accuses multinational companies of tax evasion, something they deny. The most high-profile target of his campaign has been Acacia Mining, majority-owned by Barrick Gold. Acacia has most of its productive assets in Tanzania.

Acacia has been forbidden to export ore since March. The company says the ban costs a million dollars a day as shipping containers pile up.

"It's quite clear from what the president has done, they are trying to centralize all decision making ... at the State House," said Ahmed Salim of global advisory firm Teneo Intelligence.

"Since March, after the export ban, the government has made it clear they want to renegotiate terms and contracts with the (mining) sector in general. They have used Acacia as an example to the detriment of the economy."

The company's share price has nearly halved since the ban and the CEO says Acacia's existence is threatened.

The government has conducted two audits in the last two months of the stockpiled ore, and accused Acacia of only declaring a tenth of the gold it is exporting and not declaring other minerals.

But the audits counted traces of minerals not commercially viable to extract and misunderstood metals pricing, according to an analysis by Maya Forstater of the Center for Global Development, and London-based mining consultant Alexandra Readhead.

The amount of iridium auditors say they found is three times the global consumption of the element, they noted. But stoking outrage against Acacia may be a canny strategy to force the renegotiating of contracts under the new laws, they said.

"The findings of the committees seem implausible, but building public outrage towards Acacia strengthens President Magufuli's hand in renegotiating," Readhead said.

"Tanzania could gain from a new deal with Acacia, but in the process it risks undermining confidence in the investment environment, including for the developing oil and gas industry."